2017 interim results - rsa insurance group...stated earnings / share (pence) 18.4p 7.9p underlying...

1 RSA Insurance Group plc - 2017 Interim Results

2017 INTERIM RESULTS

RSA Insurance Group plc 2 August 2017

RSA announces strong first half results.

Underlying earnings per share up 31%; Interim dividend up 32%.

Return on Tangible Equity1 16.6%.

Stephen Hester, RSA Group Chief Executive, commented:

"RSA did well in the first half. We delivered outperformance, showing record underwriting results,

attractive earnings and dividend growth with strong return on capital. Pleasingly, customers are also

growing business volumes with us.

Across the Group the focus is on making progress towards our best-in-class ambitions. And while

RSA is now measuring against higher performance standards, there is much more that can be done to

improve."

Trading results

Group operating profit £360m up 15% (H1 2016: £312m): Scandinavia £202m; Canada £71m; UK

& International £151m2.

Group underwriting profit of £222m, up 28% (H1 2016: £174m).

Record Group combined ratio of 93.2% (H1 2016: 94.7%). Scandinavia 81.9%; Canada 94.8%;

and UK & International 95.4%2.

Group attritional loss ratio of 54.9%, 0.3pts better than last year3; weather and large losses

0.2pts worse.

Group prior year underwriting profit of £79m (H1 2016: £55m).

Group premiums of £3.4bn up 11% at reported fx, and up 3% at constant fx. Volumes accounted for 1% and rate increases 2%.

Investment income of £171m (H1 2016: £187m) down 9% versus the same period last year

reflecting the impact of disposals and ongoing reinvestment at lower yields.

Below the operating result there were lower interest costs following our debt restructuring, with

other non-operating items largely as flagged.

Pre-tax profit of £263m, up 78% (H1 2016: £148m).

Underlying earnings per share (EPS) 23.3p up 31% (H1 2016: 17.8p). Stated EPS up 133% to 18.4p.

Interim dividend of 6.6p/ordinary share declared, up 32% (H1 2016: 5.0p).

1 Underlying measure, please refer to pages 21-23 for further information. 2 Excluding Ogden impact. 3 At constant exchange, ex disposals


Capital & balance sheet

Solvency II coverage ratio of 163% after dividend accrual (31 December 2016: 158%), slightly above 130-160% target range.

Reserve margin returned to 5.0% target (31 December 2016: 5.5%) after release for Ogden rate change.

Tangible equity £2.8bn (31 December 2016: £2.9bn), 273p per share.

Underlying return on opening tangible equity of 16.6% annualised (H1 2016: 12.8%).

Strategic update

Restructuring now complete. 2017 actions comprised the disposal of UK legacy liabilities

(announced in February); the issuance of c.£300m of restricted tier 1 notes in Scandinavia and

retirement of c.£600m of existing high coupon debt. These actions reduced risk, improved capital

resilience, and lowered interest costs.

The Group’s entire focus is now on the drive for outperformance. In that context, our many

performance improvement initiatives continue to deliver progress, targeted at customer service, underwriting capabilities, and costs.

The improved premium trends we report for the first half reflect the service and capability enhancements we have been implementing. Pleasingly they are reflected in every region.

Underwriting capabilities continue to be refined across the Group. These include more

sophisticated and agile pricing models, underwriter training and heightened discipline, and

technology driven insights. Progress on loss ratios can be volatile but is on track overall with a couple of business line exceptions.

Group written controllable costs for H1 2017 were down 6% year-on-year at constant exchange

to £723m (comprising 8% cost reductions, offset by 2% inflation). Group headcount down 8%

versus H1 2016. Overall we remain on track to deliver >£400m gross annualised savings by 2018 (c.£330m achieved to date).

Alternative performance measures:

The Group uses alternative performance measures, including certain underlying measures, to help explain business

performance and financial position. Where not defined in the body of this announcement, further information is set out in

the appendix on pages 21-23.


MANAGEMENT REPORT – KEY FINANCIAL PERFORMANCE DATA

Management basis

£m (unless stated) H1 2017 H1 2016

Profit and loss

Group net written premiums 3,449 3,247

Group net written premiums ex disposals 3,121

Underwriting profit 222 174

Combined operating ratio 93.2% 94.7%

Investment result 148 150

Operating result 360 312

Profit before tax 263 148

Underlying profit before tax 327 258

Net attributable profit 188 80

Metrics

Stated earnings / share (pence) 18.4p 7.9p

Underlying earnings / share (pence) 23.3p 17.8p

Interim dividend / ordinary share (pence) 6.6p 5.0p

Underlying return on tangible equity, annualised (%) 16.6% 12.8%

30 June

2017

31 Dec

2016

Balance sheet

Net asset value (£m) 3,651 3,715

Tangible net asset value (£m) 2,790 2,862

Net asset value per share 345p 352p

Tangible net asset value per share 273p 281p

Capital

Solvency II surplus (£bn) 1.1 1.1

Solvency II coverage ratio 163% 158%


CHIEF EXECUTIVE’S STATEMENT

RSA is pleased to report another half year of outperformance. But we are not relaxing. There is

much more we aim to improve - for both customers and shareholders. Competitive markets and our

own raised ambitions will demand no less.

Across RSA's markets, conditions are essentially unchanged versus 2016 though with many variations

by business line and geography. We are carefully watching inflation trends, notably in the UK. Testing

competition and, occasionally, volatile loss trends create underwriting challenges which we must

continue to address more crisply as capabilities improve.

RSA's restructuring efforts were completed by the £834m sale of UK legacy liabilities announced in

February, and the subsequent repurchase and refinancing of capital instruments. Taken together these

actions reduced risk, boosted capital resilience and increased future earnings. They leave us with

undiluted focus on the pursuit of high performance in our continuing businesses.

Our best-in-class ambitions are being pursued through companywide efforts to improve customer

service and underwriting skills, and to reduce operating costs.

Net written premiums grew 11% in the period, with higher retention and new business adding to

pricing and FX gains. Although top line growth is not our highest priority, it is nevertheless pleasing

that customers are responding to the improved capabilities we are deploying.

While underwriting results will always be ‘noisy’ over short periods, we are pleased with continuing

progress, and a combined ratio of 93.2% is our best on record. In terms of volatile items, better than

planned weather costs were offset by higher than usual large losses. Attritional loss ratio improvement

continued with an H1 ratio of 54.9% vs 55.2% for H1 2016 at constant FX.

Cost efficiency remains crucial for all businesses in our industry. RSA continues to track ahead of our

plans in this regard, with gross cost reductions of 8% (CFX) vs prior year.

The strength of our regional line-up also showed well in the period. Our Scandinavian business

contributed a majority of underwriting profits with strong underlying advances and above trend prior

year profits. Canada did well also, despite higher large losses. Our Irish business returned to profit.

Our UK business had the toughest time with Ogden costs, above plan large losses and challenges in

household loss ratios. But, excluding Ogden, results were in-line with our plan even here.

Across RSA improvement programmes are continuing to deliver. Our digital capabilities are improving,

with notable advances in digital claims and policy servicing. New, more sophisticated underwriting and

pricing models continue to roll out. Cost programmes around automation, site consolidation, lean

methodology, outsourcing and zero-based budgeting are all progressing.

Overall, RSA is in good health. We have much to do. We will fall short in areas. But we nevertheless

expect to make continued good progress in pursuit of sustained outperformance.

Stephen Hester

Group Chief Executive

1 August 2017


MANAGEMENT REPORT

SEGMENTAL INCOME STATEMENT

Management basis – 6 months ended 30 June 2017

Scandi

navia

Canada UK &

International

Central

functions

Group

H1 2017

Group

ex disposals

H1 2016

Group

H1 2016

£m £m £m £m £m £m £m

Net Written Premiums 1,064 728 1,628 29 3,449 3,121 3,247

Net Earned Premiums 896 777 1,586 (8) 3,251 3,083 3,271

Net Incurred Claims (575) (511) (1,014) (2) (2,102) (2,009) (2,108)

Commissions (24) (105) (312) - (441) (425) (480)

Operating expenses (135) (121) (228) (2) (486) (470) (509)

Underwriting result 162 40 32 (12) 222 179 174

Investment income 54 34 83 - 171 161 187

Investment expenses (2) (1) (3) - (6) (5) (6)

Unwind of discount (12) (2) (3) - (17) (15) (31)

Investment result 40 31 77 - 148 141 150

Central expenses - - - (10) (10) (12) (12)

Operating result 202 71 109 (22) 360 308 312

Interest (30) (54)

Other non-operating charges (67) (110)

Profit before tax 263 148

Tax (57) (57)

Profit after tax 206 91

Non-controlling interest (10) (6)

Other equity costs1 (8) (5)

Net attributable profit 188 80


Loss ratio (%) 64.2 65.8 64.0 - 64.7 65.1 64.5

Weather loss ratio 0.0 2.7 1.1 - 1.2 3.5 3.3

Large loss ratio 5.8 8.2 15.3 - 11.4 8.9 8.4

Current year attritional loss ratio 63.1 57.9 48.9 - 54.9 55.0 54.7

Prior year effect on loss ratio (4.7) (3.0) (1.3) - (2.8) (2.3) (1.9)

Commission ratio (%) 2.7 13.4 19.6 - 13.6 13.9 14.6

Expense ratio (%) 15.0 15.6 14.4 - 14.9 15.2 15.6

Combined ratio (%) 81.9 94.8 98.0 - 93.2 94.2 94.7

Note:

UK & International comprises the UK (and European branches), Ireland and the Middle East

Please refer to appendix for H1 2016 comparatives

1 Preference dividends of £5m and coupons of £3m paid on 2017 issued restricted tier 1 securities.


Premiums

First half 2017 Group net written premiums of £3.4bn were up 11% at reported FX and up 3% at

constant fx (excluding the impact of disposals).

Foreign exchange provided an 8% benefit to first half premiums. At current exchange rate levels, this

benefit will moderate by around half for full year 2017.

Scandinavia Canada UK & Int’l Central Total

Net Written Premiums (£m) 1,064 728 1,628 29 3,449

% changes in NWP

Volume change (including reinsurance effects) (1) 4 1 - 1

Rate increases 2 1 2 - 2

Foreign exchange 9 15 4 - 8

Total Group H1 2017 movt. (ex disposals) 10 20 7 - 11

We are pleased to report positive topline performance in the first half. Growth of 3% (at constant

exchange) included 1% volume growth and 2% rate increases.

We have seen a strengthening of underlying customer activity as capability improvements take effect.

Customer retention trends are improving and satisfaction levels remain good. Overall Group

retention improved slightly to 81%.

Our goal is to serve customers well but profitably.

Regional trends for H1 2017 include:

Scandinavian premiums up 10% at reported fx, and up 1% at constant fx, with growth in Sweden

and Norway partly offset by reductions in Denmark;

Canadian premiums up 20%, and up 5% at constant fx with Personal up 5% and Commercial

also up 5%, reflecting good growth in the broker channel;

UK & International premiums were up 7%, and up 3% at constant fx. UK premiums were up

5% (at CFX) with Personal up 12% and Commercial up 1%. Premiums in Ireland were down

8%, whilst Middle East premiums were up 9%.


Underwriting result

Group underwriting profit of £222m was up 28% year-on-year.

Total UW result Current Year UW Prior Year UW

£m H1’17 H1’16 H1’17 H1’16 H1’17 H1’16

Scandinavia 162 96 120 94 42 2

Canada 40 37 19 (2) 21 39

UK & International 32 82 22 54 10 28

Of which: UK 17 76 9 41 8 35

Group Re (12) (36) (18) (26) 6 (10)

Total Group ex. disposals 222 179 143 120 79 59

Disposals - (5) - (1) - (4)

Total Group 222 174 143 119 79 55

Current year profit of £143m (H1 2016: £119m):

The Group attritional loss ratio was 54.9% which showed a 0.3 point improvement from H1

2016 at constant exchange. Scandinavia was 1.4 points better. Canada was 0.2 points better

after adjusting for the c.1 point of benign ‘indirect’ weather that we flagged in H1 2016. The

UK & International was slightly better than a year ago and included good improvements in UK

Commercial, Ireland and the Middle East, offset by a higher UK Personal attritional loss ratio

driven by Household.

Total Group weather costs were £38m or 1.2% of net earned premiums (H1 2016: 3.5% ex

disposals; five year average: 3.2%), with experience benign in the UK and Scandinavia.

Total Group large losses were £370m or 11.4% of net earned premiums (H1 2016: 8.9% ex-

disposals; five year average: 8.6%). This elevated large loss experience was driven by higher

than trend levels in the UK, Ireland and Canada. Our expectation is it will revert to normal

patterns, but we are watching trends carefully.

Prior year profit was £79m, with prior year development providing a 2.8 point benefit to the Group

combined ratio. This included positive development from each region.

As previously flagged, the Group booked a £42m net charge (after release of FY16 margin build)

relating to the change in Ogden discount rate in the UK. £39m related to our UK business and £3m

to Ireland.

Our assessment of the margin in reserves for the Group (the difference between our actuarial

indication and the booked reserves in the financial statements) is 5% of booked claims reserves per

our target. This follows the release of the additional 0.5% that was built at FY16 in anticipation of the

Ogden discount rate change.

Underwriting operating expenses

The Group underwriting expense ratio of 14.9% was 0.3 points better than a year ago (H1 2016: 15.2%

ex disposals). There were improvements of 0.6 points in Scandinavia and 1.5 points in Canada, whilst

the UK reported ratio was 0.4 points higher (though UK total controllable costs and cost ratio

improved). We continue to work towards further improvements in the expense ratio in the coming

years.


Commissions

The Group commission ratio in H1 2017 of 13.6% compared to 13.9% (ex disposals) in H1 2016. We

expect the Group’s commission ratio to be broadly similar in the second half of 2017.

Investment result

The investment result was £148m (H1 2016: £150m) with investment income of £171m (H1 2016:

£187m), investment expenses of £6m (H1 2016: £6m) and the liability discount unwind of £17m (H1

2016: £31m).

Investment income was down 9% on prior year, primarily reflecting the impact of the disposal of

Latin America and the UK Legacy business together with ongoing reinvestment at lower yields. The

average book yield across our major bond portfolios was down slightly to 2.4% (H1 2016: 2.6%).

At current market forward rates, we expect investment income of c.£315m for the full year 2017.

Total controllable costs

As at the end of the first half of 2017 our cost reduction programme has delivered total gross

annualised cost reductions of around £330m. Overall we remain on track to deliver >£400m gross

annualised savings by 2018.

Group written total controllable costs were down 6% (ex disposals) year-on-year at constant exchange

to £723m, and comprised 8% cost reductions, offset by 2% inflation.

Scandinavia delivered year-on-year ‘real’ cost reductions of 7%, with 12% in Canada and 7% in the UK.

Group FTE1 is down 20% (ex disposals) since the start of 2014 to 13,200 at June 2017, and is down

8% H1 2017 v H1 2016.

Non-operating items

Interest costs:

Interest costs in H1 2017 were £30m (£33m including the new tier 1 issuance – see below),

down from £54m a year ago. The reduction reflects debt restructuring actions over the past

12 months.

In the first half of 2017 the Group issued c.£300m of restricted tier 1 notes in Scandinavia; and

retired c.£600m of existing high coupon debt. These actions supplemented the £200m debt

retirement completed in July 2016.

Coupon costs for the new Scandinavian issuance are reflected at the bottom of the

management P&L as ‘other equity costs’, as per accounting rules. The first half cost was £3m,

with an annualised interest cost for this instrument of £14m.

1 Full time equivalent employees.


Other non-operating charges:

£m H1 2017 H1 2016

Net gains/losses/exchange 44 (19)

Debt buyback premium (59) -

Restructuring costs (41) (70)

Amortisation (8) (7)

Pension net interest cost (3) (2)

Other1 - (12)

Total (67) (110)

Net gains of £44m included a £66m gain relating to the Legacy disposal (mainly mark-to-market

of the assets transferred to the buyer) and a £22m charge relating to the commutation of the

Group’s adverse development reinsurance cover, both as previously flagged at FY 2016.

There was a charge, as flagged at Q1 2017, of £59m relating to the premium paid on the debt

buybacks completed at the end of March.

Restructuring costs were £41m in the first half and included £20m in respect of redundancy.

2017 is expected to be the last year of our restructuring costs and we continue to anticipate

a full year charge of c.£100m.

Tax

The Group has reported a tax charge of £57m for H1 2017, giving an effective tax rate (ETR) of 21.6%

(H1 2016: 39%). This charge largely comprises tax payable on Scandinavian and Canadian profits (at

local statutory tax rates). We continue to expect the full year 2017 ETR to be in line with statutory

tax rates in our local territories.

The Group underlying tax rate in the first half was 22.4% (H1 2016: 24%). Given the scale of

unrecognised UK tax assets (which given expected changes in UK legislation are likely to last well over

10 years) this may trend towards 20% over the next few years.

The carrying value of the Group’s net deferred tax asset at 30 June 2017 was £206m (of which £202m

is in the UK). At current tax rates, a further c.£200m of deferred tax assets remain available for use

but not recognised on balance sheet; these are predominantly in the UK and Ireland.

Dividend

We are pleased to declare an interim dividend of 6.6p per ordinary share, up 32% year-on-year (H1

2016: 5.0p).

Our medium term policy of between 40-50% ordinary dividend payouts remains, with additional

distributions where justified.

1 In H1 2016 ‘other’ included Solvency II costs of £6m and a cost of £6m relating to a discount rate change on Danish claims liabilities.


BALANCE SHEET

Movement in Net Assets

Share-

holders’

funds1

Non controlling

interests

Tier 1

notes

Total

equity

Loan

capital

Equity &

loan

capital

TNAV

£m £m £m £m £m £m £m

Balance at 1 January 2017 3,715 132 - 3,847 1,068 4,915 2,862

Profit/(loss) after tax 196 10 - 206 - 206 196

Exchange gains/(losses) net of tax (3) (6) - (9) - (9) (3)

Fair value gains/(losses) net of tax (144) - - (144) - (144) (144)

Pension fund gains/(losses) net of tax (5) - - (5) - (5) (5)

Repayment & amortisation of loan capital - - - - (627) (627) -

Issue of Tier 1 notes - - 297 297 - 297 -

Share issue 4 - - 4 - 4 4

Share based payments 8 - - 8 - 8 8

Prior year final dividend (112) (4) - (116) - (116) (112)

Other equity costs2 (8) - - (8) - (8) (8)

Goodwill and intangible additions - - - - - - (8)

Balance at 30 June 2017 3,651 132 297 4,080 441 4,521 2,790

Per share (pence)

At 1 January 2017 352 281

At 30 June 2017 345 273

Tangible net assets3 decreased by 3% to £2.8bn in the first half of 2017. Profits in the period were

more than offset by fair value mark-to-market movements (partly reflecting the transfer of Legacy

assets for which a corresponding gain was included within profit) and the payment of the 2016 final

dividend. IAS 19 pension movements (excluding deficit funding contributions) were largely neutral

(see page 25 for further detail).

1 Ordinary shareholders’ funds including preference share capital of £125m. 2 Includes preference dividends of £5m and coupons of £3m paid on 2017 issued restricted tier 1 securities.


CAPITAL POSITION

Solvency II position1: Requirement

(SCR)

Eligible Own

Funds

Surplus Coverage

£bn £bn £bn %

30 June 2017 1.8 2.9 1.1 163%

31 December 2016 1.8 2.9 1.1 158%

The Solvency II coverage ratio1 increased to 163% in the first half (31 December 2016: 158%), with

the key drivers as follows:

Underlying capital generation added 14 points of coverage;

Restructuring costs, net capital investments and other non-operating items reduced the ratio

by 3 points;

Pull-to-par on unrealised bond gains accounted for a 4 point reduction;

18 points of benefit from the disposal of UK legacy liabilities, announced in February;

10 point reduction due to the debt restructuring actions taken in the first half of 2017;

Market movements, fx and IAS 19 were a small negative, reflecting the impact of narrower AA

corporate bond spreads on IAS 19 pension accounting, offset mainly by a positive impact from

equities. There was also a 3 point reduction due to the Ogden rate change;

2017 dividend accruals2 reduced the coverage ratio by 6 points.

Please refer to Appendix (page 24) for further Solvency II details (including sensitivities).

OUTLOOK

In the second half of 2017, our priorities are unchanged: the drive for further performance gains.

We aim for premium growth, however the priority is to maintain underwriting discipline.

We target a lower attritional loss ratio, and we expect further cost reduction and efficiency gains.

Volatile items (weather, large losses and ) will remain just that.

In summary, we target attractive full year 2017 performance as we continue to build from the quality

performance base now established.

1 The Solvency II capital position at 30 June 2017 is estimated. 2 Reflects 6 months accrual of a ‘notional’ dividend amount for the year. This ‘notional’ amount should not be considered in any way to be an

indication of actual dividend amounts for 2017.


REGIONAL REVIEW – SCANDINAVIA

Management basis

Net written premiums Change (%) Underwriting result

H1 2017

£m

H1 2016

£m

RFX CFX H1 2017

£m

H1 2016

£m

Split by country

Sweden 563 520 8 1 123 76

Denmark 409 371 10 - 45 17

Norway 92 74 24 8 (6) 3

Total Scandinavia 1,064 965 10 1 162 96

Split by class

Household 183 166 10 1 25 19

Personal Motor 188 176 7 (2) 41 49

Personal Accident & Other 179 158 13 5 58 7

Total Scandinavia Personal 550 500 10 1 124 75

Property 210 183 15 5 23 1

Liability 99 90 10 (1) 11 10

Commercial Motor 135 124 9 - 3 7

Other 70 68 3 (5) 1 3

Total Scandinavia Commercial 514 465 11 1 38 21

Total Scandinavia 1,064 965 10 1 162 96

Investment result

40 35

Scandinavia operating result 202 131

Operating Ratios (%) Claims Commission Op Expenses Combined

H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16

Household 85.7 87.4

Personal Motor 75.9 69.5

Personal Accident & Other 64.9 95.6

Total Scandinavia Personal 59.5 68.2 3.0 2.8 13.1 13.0 75.6 84.0

Property 85.7 99.7

Liability 85.5 84.7

Commercial Motor 96.8 93.0

Other 98.2 93.1

Total Scandinavia Commercial 70.2 72.3 2.3 3.0 17.6 19.0 90.1 94.3

Total Scandinavia 64.2 70.0 2.7 2.9 15.0 15.6 81.9 88.5

Of which: 5yr ave

Weather loss ratio 0.0 0.3 1.0

Large loss ratio 5.8 5.4 5.5

Current year attritional loss ratio 63.1 64.5

Prior year effect on loss ratio (4.7) (0.2)

YTD rate changes1 (%) At June 2017 At Dec 2016

Personal Household 1 4

Personal Motor 1 2

Commercial Property - 3

Commercial Liability 2 3

Commercial Motor 1 3

1 Rate changes reflect changes for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year


SCANDINAVIA

In H1 2017, Scandinavia delivered an excellent underwriting profit of £162m, up 56% (at constant fx)

versus a year ago, with both strong current and prior year profitability.

We continue to make good progress with our customer agenda as we aim to deliver an ‘effortless’

customer experience. Our improvement initiatives continue with the launch of a ‘chat bot’ service in

Sweden and a new customer service portal in Denmark that enhances the customer journey and claims

handling process. Our overall retention rate improved slightly to 80%.

Net written premiums of £1,064m were up 10% at reported fx and up 1% at constant fx, driven by

Norway and Sweden (H1 2016: £965m as reported). Rates were up 2% whilst volumes were down

1%.

The underwriting result was £162m (H1 2016: £96m as reported; £104m at constant fx) with current

year profit of £120m and prior year profit of £42m.

The current year attritional loss ratio of 63.1% was 1.4 points better than H1 2016 reflecting

underwriting discipline, ongoing capability improvements and lower claims handling costs. Benign

weather experience (0.3 points better than last year) was offset by adverse large loss experience (0.4

points higher than last year). The prior year effect on the loss ratio was unusually positive, producing

a benefit of 4.7%. The overall combined ratio was 81.9% (H1 2016: 88.5%).

After including an investment result of £40m (H1 2016: £35m), the total operating profit was £202m,

up 54%.

The Scandinavian performance improvement programme has continued to deliver well, with particular

focus on operational efficiency, e.g. process redesign, robotics and automation. We’ve also seen

further site consolidation progress and IT cost reduction.

Total written controllable expenses were down 5% year-on-year, with 7% cost reductions offset by

2% inflation. The earned controllable cost ratio of 24.2% showed a 1.2 point reduction year-on-year.

Headcount was down 10% in the first half of the year and is now down 18% since the end of 2013.

Scandinavia – Outlook

We continue to expect the Scandinavian P&C markets to grow in line with local GDP growth and we

target medium-term growth broadly in line with the market, subject to maintaining underwriting

discipline.

Our focus remains on further improving the underlying performance of the business, particularly

customer volumes, attritional loss ratios and cost improvements. Our COR ambition for Scandinavia

is <85%.


REGIONAL REVIEW – CANADA

Management basis


H1 2017

£m

H1 2016

£m

RFX CFX H1 2017

£m

H1 2016

£m

Household 201 168 20 6 28 21

Personal Motor 301 252 19 5 4 28

Total Canada Personal 502 420 20 5 32 49

Property 89 73 22 7 (2) (16)

Liability 51 44 16 2 3 (2)

Commercial Motor 61 51 20 5 4 5

Marine & Other 25 21 19 4 3 1

Total Canada Commercial 226 189 20 5 8 (12)

Total Canada 728 609 20 5 40 37


Canada operating result 71 69

Operating Ratios (%) Claims Commission Op Expense Combined H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16

Household 88.3 90.1


Total Canada Personal 67.3 61.5 11.2 11.4 15.5 16.6 94.0 89.5

Property 101.3 118.5

Liability 94.6 104.4


Marine & Other 89.2 95.5

Total Canada Commercial 62.5 69.7 18.4 18.0 15.7 18.2 96.6 105.9

Total Canada 65.8 64.0 13.4 13.4 15.6 17.1 94.8 94.5

Of which: 5yr ave





YTD rate changes1 (%) At June 2017 At Dec 2016


Personal Motor (2) (1)

Commercial Property 1 2

Commercial Liability 1 2

Commercial Motor - -



CANADA

Canada delivered a first half underwriting profit of £40m despite higher large losses and lower prior

year releases versus a year ago.

We continue to work hard to enhance our customer offering. In Johnson we’ve made strong progress

in digital capabilities, and customer scores have continued to improve and outperform benchmarks. In

our broker distributed businesses, faster response times and new digital tools enable brokers to

service their clients anywhere, anytime, reducing the time to quote from hours to minutes. Customer

retention has improved to 86% (versus 84% a year ago).

Net written premiums of £728m were up 20% at reported fx and up 5% at constant fx (H1 2016:

£609m as reported). Growth comprised 2% from increased volumes, 1% from rate increases and 2%

from lower reinsurance costs. Growth was particularly good in the broker channel with Personal

broker up 12% and Commercial up 5%. Johnson, our Personal direct business, returned to volume

growth in the second quarter.

The underwriting profit was £40m (H1 2016: £37m) with current year profit of £19m and prior year

profit of £21m.

The current year attritional loss ratio was 57.9%, versus 57.1% a year ago. However, H1 2016 was

flattered by c.1pt due to benign indirect weather experience, as previously disclosed: excluding this

the attritional loss ratio was c.0.2pts better than a year ago. Favourable weather experience (3.9

points better than last year due to Fort McMurray losses in H1 2016) was partly offset by adverse

large loss experience (1.9 points higher). Prior year reserve releases, whilst still positive at 3.0%, were

lower than last year (H1 2016: 6.0%). The overall combined ratio was 94.8% (H1 2016: 94.5%).

After including an investment result of £31m (H1 2016: £32m), the total operating profit was £71m,

up 3%.

Our business improvement programme in Canada has continued well during the first half of the year,

delivering further enhancements to pricing sophistication, process simplification, site consolidation.

and the implementation of the Guidewire claims system proceeding as planned.


2% inflation. The earned controllable cost ratio of 19.3% showed a 2.4 point reduction year-on-year.


Canada – Outlook

We target a continuation of the positive premium trends we have seen in the first half of 2017 and

continued progress towards our combined ratio ambition of <94%. Our focus is on customer delivery,

operational improvement (in underwriting, claims, technology and process simplification) and cost

reduction.


REGIONAL REVIEW – UK & INTERNATIONAL

Management basis


H1 2017

£m

H1 2016

£m

RFX CFX H1 2017

£m

H1 2016

£m

Household 261 248 5 5 5 26

Personal Motor 149 110 35 35 1 (11)

Pet 144 138 4 4 1 (1)

Total UK Personal 554 496 12 12 7 14

Property 334 318 5 2 1 42

Liability 155 155 - (1) 8 12

Commercial Motor 114 131 (13) (13) (6) (2)

Marine & Other 207 175 18 9 7 10

Total UK Commercial 810 779 4 1 10 62

Total UK 1364 1,275 7 5 17 76

Ireland 152 151 1 (8) 2 (1)

Middle East 112 92 22 9 13 7

Total UK & International 1,628 1,518 7 3 32 82


UK & International operating result 109 156

Operating Ratios (%) Claims Commission Op Expenses Combined

H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16 H1‘17 H1‘16

Household 98.0 91.0


Pet 99.3 100.7

Total UK Personal 60.8 59.9 20.9 21.5 17.0 16.1 98.7 97.5

Property 99.5 86.8

Liability 95.1 91.8


Marine & Other 96.0 93.8

Total UK Commercial 65.9 59.8 20.5 20.1 12.3 12.3 98.7 92.2

Total UK 63.7 59.8 20.7 20.7 14.3 13.9 98.7 94.4

Ireland 74.5 76.8 11.6 11.4 12.7 12.5 98.8 100.7

Middle East 50.5 58.2 18.7 16.6 18.1 16.6 87.3 91.4

UK & International 64.0 61.3 19.6 19.6 14.4 13.9 98.0 94.8

Of which: 5yr ave





UK YTD rate changes1 (%) At June 2017 At Dec 2016


Personal Motor 12 9

Commercial Property (1) (1)

Commercial Liability 1 -

Commercial Motor 12 5



UK & INTERNATIONAL

In H1 2017 the UK & International delivered a combined ratio of 95.4% (excluding the impact of

Ogden; 98.0% including Ogden) despite a competitive landscape.

UK

In the UK our customer capabilities have continued to advance with improved satisfaction metrics for

Personal Intermediated and Motability. Motability improved on their NPS score, increasing 10 pts to

+86 for the half year.

First half net written premiums in the UK increased by 5% at constant exchange, with rate increases

of 1% and volume increases of 4%. UK Personal growth of 12% was underpinned by continued growth

in our motor telematics proposition. UK Commercial net written premiums grew by 1% at constant

exchange. Targeted growth in our Marine and Property portfolios helped offset shrinkage in

Commercial Motor as a result of strong underwriting actions.

The UK underwriting result of £56m excluding Ogden (£17m including the impact of the Ogden

discount rate change) (H1 2016: £76m) was achieved despite difficult trading conditions. Weather and

large losses taken together were 1.6 points worse than last year. The attritional loss ratio deteriorated

mainly due to inflationary experience in Personal Household. Prior year reserve releases were positive

but lower than last year due to the impact of Ogden.

Our transformation agenda continues to deliver benefits with increased process simplification and

enhanced data analytics capabilities.


2% inflation. The earned controllable cost ratio of 21.2% improved 0.6 points year-on-year.


Ireland

Ireland returned to underwriting profit delivering a first half profit of £2m and combined ratio of 98.8%

(96.7% ex Ogden), underpinned by disciplined underwriting actions. The attritional loss ratio of 60.9%

was 4.4 points better than prior year. The result also includes a £3m cost due to the Ogden discount

rate change. Net written premiums of £152m were down 8% at constant FX versus H1 2016 following

targeted remediation activity.

Middle East

The Middle East region delivered an underwriting result of £13m (H1 2016: £7m) and combined ratio

of 87.3% (H1 2016: 91.4%) driven by a 4.5 point improvement in the attritional loss ratio following

underwriting actions taken across the portfolio. Premiums of £112m were up 9% at constant FX

despite challenging trading conditions in Saudi Arabia.

UK & International – Outlook

We expect underlying premium trends to continue into the second half. Underwriting discipline and

attritional loss ratios will be a key focus, resulting in some portfolio reductions coupled with targeted

growth in stronger areas. Our transformation plans target further underwriting improvements, cost

reductions and capability uplifts.

In Ireland we continue to target a return to operating profit for the full year 2017, although the market

remains challenging, in particular for claims inflation. In the Middle East the medium term outlook

remains positive and work is underway to further develop capabilities throughout the region including

underwriting and pricing sophistication.


INVESTMENT PERFORMANCE

Management basis

Investment result H1 2017

£m

H1 2016

£m

Change

%

Bonds 136 153 (11)

Equities 16 14 14

Cash and cash equivalents 3 6 (50)

Property 11 11 -

Other 5 3 67

Investment income 171 187 (9)

Investment expenses (6) (6) -

Unwind of discount (17) (31) 45

Investment result 148 150 (1)

Balance sheet unrealised gains (pre-tax) 30 June 2017

(£m)

31 Dec 2016

(£m)

Change

%

Bonds 469 619 (24)

Equities 16 8 100

Other 2 2 -

Total 487 629 (23)

Investment portfolio Value

31 Dec

2016

Foreign

exchange

Mark to

market

Other

movements

Transfer

from assets

held for sale

Value

30 June

2017

£m £m £m £m £m £m

Government bonds 3,713 12 (43) 161 - 3,843

Non-Government bonds 7,832 34 (54) (672) 87 7,227

Cash 985 (12) - (215) 3 761

Equities 170 8 (3) 53 - 228

Property 333 - 2 1 - 336

Prefs & CIVs 522 (3) 13 10 - 542

Other 88 (1) - 67 - 154

Total 13,643 38 (85) (595) 90 13,091

Split by currency:

Sterling 3,994 3,582

Danish Krone 1,081 1,101

Swedish Krona 2,565 2,595

Canadian Dollar 3,232 3,071

Euro 1,345 1,407

Other 1,426 1,335

Total 13,643 13,091

Credit quality – bond portfolio

Non-government

Government

30 June

2017

%

31 Dec

2016

%

30 June

2017

%

31 Dec

2016

%

AAA 38 35 67 65

AA 18 22 28 30

A 30 30 4 4

BBB 12 11 1 1

< BBB 2 2 - -

Non rated - - - -

Total 100 100 100 100


INVESTMENT PERFORMANCE

Investment income of £171m (H1 2016: £187m) was offset by investment expenses of £6m (H1 2016:

£6m) and the liability discount unwind of £17m (H1 2016: £31m). Investment income was down 9%

on prior year, primarily reflecting the impact of the disposal of Latin America and the UK Legacy

business together with ongoing reinvestment at lower yields.

The average book yield over the period on the total portfolio was 2.5% (H1 2016: 2.7%), with average

yield on the bond portfolios of 2.4% (H1 2016: 2.6%). Reinvestment rates in the Group’s major bond

portfolios over the first half was approximately 1.6%.

Average duration of the Group’s bond portfolios is marginally lower at 3.6 years (31 December 2016:

3.7 years).

The investment portfolio decreased by 4% during the first half to £13.1bn. The movement was driven

primarily by cash outflows for corporate debt restructuring.

At 30 June 2017, high quality widely diversified fixed income securities represented 85% of the portfolio

(31 December 2016: 85%). Equities (largely REITs) represented 2% (31 December 2016: 1%) and cash

6% of the total portfolio (31 December 2016: 7%).

The quality of the bond portfolio remains very high with 98% investment grade and 71% rated AA or

above. We remain well diversified by sector and geography.

Unrealised bond gains and pull-to-par

Balance sheet unrealised gains of £487m (pre-tax) reduced by £142m or 23% during the first half,

driven by realised gains from the UK Legacy disposal and bond pull-to-par.

We anticipate that the remaining gains will largely unwind over the next 3.5 years, based on current

forward yields. We expect pull-to-par of c.£90m in H2 2017, c.£150m in 2018, and c.£110m in 2019.

Outlook

Based on current forward bond yields and foreign exchange rates it is estimated that investment

income will be c.£315m for full year 2017. This projected income number is, however, sensitive to

changes in market conditions. We continue to expect a discount unwind on long-tail liabilities in the

range £30-35m per annum.


APPENDIX


UNDERLYING AND ALTERNATIVE PERFORMANCE MEASURES

The Group uses alternative performance measures, including certain underlying measures, to help

explain business performance and financial position. Where not defined in the body of this

announcement, further information is set out below.

Note 7 on pages 44-46 of the condensed consolidated financial statements presents a reconciliation

of the management basis to statutory income statement.

Combined operating ratio

The Group’s combined operating ratio (COR) is calculated on an ‘earned’ basis as follows:

COR = loss ratio + commission ratio + expense ratio

Where:

Loss ratio = net incurred claims / net earned premiums

Commission ratio = commissions / net earned premiums

Expense ratio = operating expenses / net earned premiums

Constant exchange (CFX)

Prior period comparative translated at current period exchange rates.

Controllable costs

Total controllable costs are stated on a ‘written’ basis, and include underwriting written controllable

expenses of £520m, claims expenses of £187m (included within net incurred claims), investment

expenses of £6m, and central expenses of £10m. These items are included within total expenses in

the condensed consolidated income statement.

Current year underwriting result

The profit or loss earned from business for which protection has been provided in the current financial

period.

Interest costs

Interest costs as shown on a management basis (£30m) comprise coupon costs only. On a statutory

basis finance costs of £89m comprise coupon costs of £30m plus debt buyback costs of £59m.

Investment income

Investment income of £171m as shown in the management basis P&L compares to net investment

return of £169m shown on a statutory basis. The difference of £2m relates to certain realised and

unrealised net losses that are shown within net investment return within the statutory income

statement.

Operating profit

Operating profit is calculated as the underwriting result, plus the investment result, less central costs.

Note 7 on pages 44-46 of the condensed consolidated financial statements presents a reconciliation

of operating profit to profit before tax.

Prior year underwriting result

The profit or loss arising from settling claims incurred in previous years at a better or worse level than

the previous estimated costs.


‘Record’ underwriting performance

Record Group underwriting performance (combined ratio and/or underwriting profit) considers the

periods for 2006-2017. In order to compare on a ‘like-for-like’ basis, historical periods have been

adjusted for central expense reallocation changes made in 2015, Scandinavian discount rate changes

made in 2014, and IAS 19 pension net interest cost changes made in 2012. In the case of the expense

reallocations and IAS 19 changes, the restatement value applied in the year of change has been applied

to all preceding years back to 2006.

Reported exchange (RFX)

Prior period comparative translated at the exchange rates reported at that time.

Tangible net asset value (TNAV)

Tangible net asset value of £2,790m at 30 June 2017 comprises shareholders’ funds of £3,651m, less

goodwill & intangible assets of £736m, less £125m preference share capital.

Underlying earnings per share (EPS)

Please refer to page 23 for calculation.

Underlying profit before tax

Underlying profit before tax is calculated as operating profit of £360m less interest costs of £30m less

coupon costs of £3m on the 2017 issuance of restricted tier 1 securities (as shown in Note 9 of the

condensed consolidated financial statements).

Reconciliation of underlying profit before tax to profit before tax:

H1 2017 H1 2016


Less non-operating charges (67) (110)

Add back coupon on 2017 issued tier 1 securities 3 -

Less profit before tax from discontinued operations - (7)

Add back loss before tax on sale of discontinued operations - 20

Profit before tax (statutory basis) 263 161

Underlying profit after tax attributable to ordinary shareholders

Reconciliation of underlying profit after tax attributable to ordinary shareholders to profit after tax:

H1 2017 H1 2016

Underlying PAT attributable to ordinary shareholders 238 180

Add non-controlling interest 10 6

Add preference dividend 5 5

Less non-operating charges (67) (110)

Add back coupon on 2017 issued tier 1 securities 3 -

Add difference between underlying and statutory tax 17 10

Profit after tax (statutory basis) 206 91

Underlying return on tangible equity (ROTE)

Please refer to page 23 for calculation.


Underlying tax rate

The underlying Core Group tax rate mainly comprises the local statutory tax rates in our territories

applied to underlying regional profits (operating profits less interest costs).

Underwriting result

Comprise net earned premiums less net incurred claims (including claims handling expenses), less

underwriting expenses less commission expenses.

Net asset value (NAV) and tangible net asset value (TNAV) per share

Net asset value per share data at 30 June 2017 was based on total ordinary shareholders’ funds of

£3,651m, adjusted by £125m for preference shares. Tangible net asset value per share was based on

a tangible book value of £2,790m.

Return on equity and tangible equity, and earnings per share calculations

H1 2017 H1 2016

£m £m

Profit after tax 206 91

Less: non-controlling interest (10) (6)

Less: coupon on 2017 issued restricted tier 1 instrument (3) -

Less: preference dividend (5) (5)

A Profit attributable to ordinary shareholders 188 80

Operating profit before tax 360 312

Less: interest costs (30) (54)

Less: coupon on 2017 issued restricted tier 1 instrument (3) -


Less: underlying tax1 (74) (67)

Less: non-controlling interest (10) (6)

Less: preference dividend (5) (5)

B Underlying profit after tax attributable to ordinary shareholders 238 180

Opening shareholders’ funds 3,715 3,642

Less: preference share capital (125) (125)

C Opening ordinary shareholders’ funds 3,590 3,517

Less: goodwill & intangibles (728) (679)

D Opening tangible ordinary shareholders’ funds 2,862 2,838

E Weighted average no. shares issue during the period (un-diluted) 1,020.3k 1,017.5k

Return on equity (annualised)

(2xA)/C Reported 10.5% 4.6%

(2xB)/C Underlying 13.3% 10.3%

Return on tangible equity (annualised)

(2xA)/D Reported 13.1% 5.7%

(2xB)/D Underlying 16.6% 12.8%

Earnings per share

A/E Basic earnings per share 18.4p 7.9p

B/E Underlying earnings per share 23.3p 17.8p

1 Using underlying assumed tax rate of 22.4% in H1 2017 (applied to operating profits of £360m less interest costs of £30m) and 26% in H1 2016

We expect the underlying assumed tax rate to continue to fall to a rate broadly in line with the

statutory tax rates in our operating territories. Given the scale of unrecognised UK tax assets it may

trend towards 20% over the next few years.


DISPOSALS

H1 2016 net written premiums of £3,247m included £126m in respect of businesses now disposed

(Latin America and Russia). The underwriting profit of £174m for the same period included a loss of

£5m in respect of these disposed businesses. See page 26 for further detail.

CAPITAL

Solvency II sensitivities

H1 2017 coverage ratio 163%

Sensitivities (change in coverage ratio): Incl. pensions Excl. pensions

Interest rates: +1% non-parallel1 shift +13% +5%

Interest rates: -1% non-parallel1 shift -12% -5%

Equities: -15% -8% -2%

Foreign exchange: GBP +10% vs all currencies -3% -3%

Cat loss of £75m net -4% -4%

Credit spreads: +0.25% parallel shift +4% -4%

Credit spreads: -0.25% parallel shift -13% +4%

The above sensitivities have been considered in isolation. The impact of a combination of sensitivities

may be different to the individual outcomes stated above.

Reconciliation of IFRS total capital to Eligible Own Funds

30 June

2017

£bn

Shareholders’ funds (incl. preference shares) 3.7

Loan capital 0.7

Non-controlling interests 0.1

Total IFRS capital 4.5

Less: goodwill & intangibles (0.7)

Adjust technical provisions to SII basis (0.4)

Basic Own Funds 3.4

Tiering & availability restrictions (0.4)

Forseeable dividends (0.1)

Eligible Own Funds 2.9

1 The interest rate sensitivity assumes a non-parallel shift in the yield curve. This is to reflect that the long end of the yield curve is typically more stable than the short end.


PENSIONS

The table below provides a reconciliation of the movement in the Group’s pension fund position under

IAS 19 (net of tax) from 1 January 2017 to 30 June 2017.

UK non-UK Group

£m £m £m

Pension fund surplus/(deficit) at 1 January 2017 (113) (84) (197)

Actuarial gains/(losses)1 2 (7) (5)

Deficit funding 54 - 54

Other movements2 3 2 5

Pension fund surplus/(deficit) at 30 June 2017 (54) (89) (143)

At an aggregate level the pension fund position under IAS 19 improved during the first half from a

£197m deficit to a £143m deficit. This was driven by deficit funding contributions (£65m pre-tax).

Market movements, in aggregate, were largely neutral.

1 Actuarial gains/(losses) include pension investment expenses, variance against expected returns, change in actuarial assumptions and experience losses. 2 Other movements include regular contributions, service/administration costs, expected returns and interest costs.


SEGMENTAL ANALYSIS

Management basis – 6 months ended 30 June 2016 (re-presented onto current segmental

split)

Scandi

navia

Canada UK &

International

Central

functions

Group ex.

disposals

Disposals1 Group

H1 2016

£m £m £m £m £m £m £m

Net Written Premiums 965 609 1,518 29 3,121 126 3,247

Net Earned Premiums 832 682 1,584 (15) 3,083 188 3,271

Net Incurred Claims (582) (437) (971) (19) (2,009) (99) (2,108)

Commissions (24) (91) (310) - (425) (55) (480)

Operating expenses (130) (117) (221) (2) (470) (39) (509)

Underwriting result 96 37 82 (36) 179 (5) 174

Investment income 48 34 79 - 161 26 187

Investment expenses (1) (1) (3) - (5) (1) (6)

Unwind of discount (12) (1) (2) - (15) (16) (31)

Investment result 35 32 74 - 141 9 150

Central expenses - - - (12) (12) - (12)

Operating result 131 69 156 (48) 308 4 312

Interest (54)

Other non-operating charges (110)

Profit before tax 148

Tax (57)

Profit after tax 91

Underlying profit before tax 258

Loss ratio (%) 70.0 64.0 61.3 - 65.1 - 64.5

Weather loss ratio 0.3 6.6 3.8 - 3.5 - 3.3

Large loss ratio 5.4 6.3 10.8 - 8.9 - 8.4

Current year attritional loss ratio 64.5 57.1 49.0 - 55.0 - 54.7

Prior year effect on loss ratio (0.2) (6.0) (2.3) - (2.3) - (1.9)

Commission ratio (%) 2.9 13.4 19.6 - 13.9 - 14.6

Expense ratio (%) 15.6 17.1 13.9 - 15.2 - 15.6

Combined ratio (%) 88.5 94.5 94.8 - 94.2 - 94.7

1 Disposals comprise Latin America and Russia, both completed during H1 2016.


COMBINED RATIO DETAIL

Group ex. disposals

£m unless stated Current

year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 1 3,430 7 19 13 3,449 3,118 3 3,121

Net Earned Premiums 2 3,236 8 15 14 3,251 3,094 (11) 3,083

Net Incurred Claims 3 (2,186) 9 84 15 (2,102) (2,085) 76 (2,009)

Commissions 4 (424) 10 (17) 16 (441) (422) (3) (425)

Operating expenses 5 (483) 11 (3) 17 (486) (467) (3) (470)

Underwriting result 6 143 12 79 18 222 120 59 179

CY attritional claims 19 (1,778) (1,700)

Weather claims 20 (38) (109)

Large losses 21 (370) (276)

Net incurred claims 22 (2,186) (2,085)

Loss ratio (%) =15 / 14 23 64.7 65.1

Weather loss ratio =20 / 2 24 1.2 3.5

Large loss ratio =21 / 2 25 11.4 8.9

Current year attritional loss ratio =19 / 2 26 54.9 55.0

Prior year effect on loss ratio =23 - 24 - 25 - 26 27 (2.8) (2.3)

Commission ratio (%) =16 / 14 28 13.6 13.9

Expense ratio (%) =17 / 14 29 14.9 15.2

Combined ratio (%) =23 + 28 + 29 30 93.2 94.2

Scandinavia


year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 1,066 (2) 1,064 965 - 965

Net Earned Premiums 896 0 896 832 - 832

Net Incurred Claims (617) 42 (575) (584) 2 (582)

Commissions (24) 0 (24) (24) - (24)

Operating expenses (135) 0 (135) (130) - (130)

Underwriting result 120 42 162 94 2 96

CY attritional claims (565) (537)

Weather claims 0 (2)

Large losses (52) (45)

Net incurred claims (617) (584)

Loss ratio (%) 64.2 70.0

Weather loss ratio

-

0.3

Large loss ratio 5.8 5.4



Commission ratio (%) 2.7 2.9

Expense ratio (%) 15.0 15.6

Combined ratio (%) 81.9 88.5



Canada


Year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 728 - 728 612 (3) 609

Net Earned Premiums 777 - 777 685 (3) 682


Commissions (105) - (105) (94) 3 (91)

Operating expenses (118) (3) (121) (114) (3) (117)

Underwriting result 19 21 40 (2) 39 37


Weather claims (21) (45)



Loss ratio (%) 65.8 64.0

Weather loss ratio 2.7 6.6







Total UK


year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 1,343 21 1,364 1,269 6 1,275

Net Earned Premiums 1,317 13 1,330 1,348 (1) 1,347


Commissions (260) (15) (275) (271) (7) (278)


Underwriting result 9 8 17 41 35 76





Loss ratio (%) 63.7 59.8










UK Personal


year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 549 5 554 496 - 496

Net Earned Premiums 549 9 558 553 - 553

Net Incurred Claims (329) (10) (339) (334) 3 (331)

Commissions (116) (1) (117) (119) - (119)


Underwriting result 9 (2) 7 11 3 14





Loss ratio (%) 60.8 59.9




Prior year effect on loss ratio 0.8 (0.5)




UK Commercial


year

Prior

year

H1 2017

total Current

year

Prior

year

H1 2016

total

Net Written Premiums 794 16 810 773 6 779

Net Earned Premiums 768 4 772 795 (1) 794


Commissions (144) (14) (158) (152) (7) (159)


Underwriting result - 10 10 30 32 62





Loss ratio (%) 65.9 59.8









REPORTING AND DIVIDEND TIMETABLE

Reporting:

Q3 2017 trading update 2 November 2017

Dividend:

Interim ordinary dividend for the period ended 30 June 2017

Announcement date 2 August 2017

Ex-dividend date 7 September 2017

Record date 8 September 2017

Dividend payment date 13 October 2017

2nd Preference Dividend

Announcement date 2 August 2017

Ex-dividend date 10 August 2017

Record date 11 August 2017

Dividend payment date 2 October 2017

Note: a scrip dividend alternative is not being offered for the 2017 interim ordinary dividend

payment.

Note: the interim ordinary dividend is conditional upon the directors being satisfied, in their absolute

discretion, that the payment of the interim ordinary dividend would not breach any legal or regulatory

requirements, including Solvency II regulatory capital requirements.

DISCLOSURE CHANGE

To better align with reporting practice across the European insurance sector, we intend to continue

the provision of class of business premium information and performance trend commentary in our

disclosures, but to report combined ratios at total Personal and total Commercial level only for each

region.

Our intention is that this will apply for full year 2017 disclosures and reporting periods thereafter.


Enquiries:

Investors & analysts Press

Rupert Taylor Rea Alice Hunt

Director of Investor Relations Director of External Communications

Tel: +44 (0) 20 7111 7140 Tel: +44 (0) 20 7111 7305

Email: [email protected] Email: [email protected]

Laura de Mergelina Eilis Murphy & Robin Wrench

Investor Relations Manager Brunswick Group

Tel: +44 (0) 20 7111 7243 Tel: +44 (0) 20 7404 5959

Email: [email protected] Email: [email protected]

Further information

A live webcast of the analyst presentation, including the question and answer session, will be broadcast

on the website at 09:00am on 2 August 2017. A webcast and transcript of the presentation will be

available via the company website (www.rsagroup.com).

Important disclaimer

This press release and the associated conference call may contain ‘forward-looking statements’ with

respect to certain of the Group’s plans and its current goals and expectations relating to its future

financial condition, performance, results, strategic initiatives and objectives. Generally, words such as

“may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”,

“seek”, “continue” or similar expressions identify forward-looking statements. These forward-looking

statements are not guarantees of future performance. By their nature, all forward-looking statements

are inherently predictive and speculative and involve risk and uncertainty because they relate to future

events and circumstances which are beyond the Group’s control, including amongst other things, UK

domestic and global economic business conditions, market-related risks such as fluctuations in interest

rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition,

inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations

within relevant industries, as well as the impact of tax and other legislation or regulations in the

jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial

condition, performance and results may differ materially from the plans, goals and expectations set

forth in the Group’s forward-looking statements. Forward-looking statements in this press release are

current only as of the date on which such statements are made. The Group undertakes no obligation

to update any forward-looking statements, save in respect of any requirement under applicable law or

regulation. Nothing in this press release shall be construed as a profit forecast.

mailto:[email protected]

mailto:[email protected]


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of contents

Primary Statements 33

Basis of Preparation and Significant Accounting Policies

1. Basis of preparation 38

2. Adoption of new and revised standards 38

3. Recently issued accounting pronouncements 38

Risk Management

4. Risk management 39

Significant Transactions and Events

5. Discontinued operations and disposals 40

6. Reorganisation costs 43

Notes to the Condensed Consolidated Income Statement and

Condensed Consolidated Statement of Other Comprehensive Income

7. Operating segments 44

8. Earnings per share 46

9. Distributions paid and declared 47

Notes to the Condensed Consolidated Statement of Financial Position

10. Goodwill and intangible assets 47

11. Financial assets and fair value measurements 47

12. Cash and cash equivalents 52

13. Share capital 52

14. Tier 1 notes 52

15. Loan capital 53

16. Insurance contract liabilities 53

17. Retirement benefit obligations 55

18. Related party transactions 55

19. Results for the year 2016 55

Appendix

A. Exchange rates 56

Responsibility Statement of the Directors in respect of the half-yearly

financial report

57

Independent Review Report to RSA Insurance Group plc 58


CONDENSED CONSOLIDATED INCOME STATEMENT

STATUTORY BASIS

for the 6 month period ended 30 June 2017

(Reviewed) (Reviewed)

6 months 6 months

30 June 2017 30 June 2016

Note £m £m

Income

Gross written premiums 4,026 3,726

Less: reinsurance premiums (577) (647)

Net written premiums 7 3,449 3,079

Change in the gross provision for unearned premiums (295) (169)

Less: change in provision for unearned reinsurance premiums 97 174

Change in provision for unearned premiums (198) 5

Net earned premiums 3,251 3,084

Net investment return 169 144

Other operating income 76 61

Total income 3,496 3,289

Expenses

Gross claims incurred (2,584) (2,420)

Less: claims recoveries from reinsurers 482 408

Net claims (2,102) (2,012)

Underwriting and policy acquisition costs (1,002) (961)

Unwind of discount (17) (32)

Other operating expenses (76) (69)

Total expenses (3,197) (3,074)

Finance costs 15 (89) (54)

Net gains related to business disposals 5d 52 -

Net share of profit after tax of associates 1 -

Profit before tax 7 263 161

Income tax expense (57) (36)

Profit after tax from continuing operations 206 125

Loss from discontinued operations, net of tax 5a - (34)

Profit for the period 206 91

Attributable to:

Equity holders of the Parent Company 196 85

Non-controlling interests 10 6

206 91

Earnings per share on profit attributable to the ordinary shareholders of the Parent Company:

Basic

From continuing operations 8 18.4p 11.2p

From discontinued operations 8 - (3.3)p

18.4p 7.9p

Diluted

From continuing operations 8 17.9p 11.1p

From discontinued operations 8 - (3.3)p

17.9p 7.8p

Ordinary dividend

Final paid in respect of prior year 9 11.0p 7.0p

Interim proposed/paid in respect of current year 9 6.6p 5.0p

The following explanatory notes form an integral part of these condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

STATUTORY BASIS



6 months 6 months

30 June 2017 30 June 2016

£m £m

Note (Re-presented1)

Profit for the period 206 91

Items from continuing operations that may be reclassified to the

income statement:

Exchange (losses)/gains net of tax on translation of foreign operations (9) 179

Fair value (losses)/gains on available for sale financial assets net of tax (144) 215

(153) 394

Items from continuing operations that will not be reclassified to

the income statement:

Pension - remeasurement of net defined benefit liability net of tax (5) (22)

(5) (22)

Other comprehensive (expense)/income for the period from

continuing operations (158) 372

Other comprehensive income for the period from discontinued

operations 5a - 122

Total other comprehensive (expense)/income for the period (158) 494

Total comprehensive income for the period from continuing

operations 48 497

Total comprehensive expense for the period from discontinued

operations 5a - 88

Total comprehensive income for the period 48 585

Attributable to:

Equity holders of the Parent Company

From continuing operations 44 478

From discontinued operations - 91

44 569

Non-controlling interests

From continuing operations 4 19

From discontinued operations - (3)

4 16

48 585

1 On a basis consistent with FY 2016 the HY 2016 Other Comprehensive Income exchange gains and losses have been reclassified resulting in a total net impact of nil and a reclassification of £94m income from continuing to discontinued operations.



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

STATUTORY BASIS


(Reviewed)

Ordinary

share

capital

Ordinary

share

premium

Own

shares

Preference

shares

Revaluation

reserves

Capital

redemption

reserve

Foreign

currency

translation

reserve

Retained

earnings

Share-

holders'

equity

Tier 1

notes

Non-

controlling

interests

Total

equity

£m £m £m £m £m £m £m £m £m £m £m £m

Balance at 1 January 2017 1,020 1,080 (1) 125 496 389 78 528 3,715 - 132 3,847

Total comprehensive income for the period

Profit for the period - - - - - - - 196 196 - 10 206

Other comprehensive

expense - - - - (141) - (7) (4) (152) - (6) (158)

- - - - (141) - (7) 192 44 - 4 48

Transactions with owners of the Company

Contributions and distribution

Dividends (note 9) - - - - - - - (120) (120) - (4) (124)

Shares issued for cash 1 3 - - - - - - 4 - - 4

Share based payments 2 - - - - - - 6 8 - - 8

Issue of Tier 1 notes (note

14) - - - - - - - - - 297 - 297

Other reserve transfer - - - - (7) - - 7 - - - -

Total transactions with

owners of the Company 3 3 - - (7) - - (107) (108) 297 (4) 185

Balance at 30 June 2017 1,023 1,083 (1) 125 348 389 71 613 3,651 297 132 4,080

Balance at 1 January 2016 1,017 1,077 (1) 125 293 389 (221) 963 3,642 - 129 3,771

Total comprehensive income for the

period

Profit for the period - - - - - - - 85 85 - 6 91

Other comprehensive income for the period - - - - 243 - 263 (22) 484 - 10 494

- - - - 243 - 263 63 569 - 16 585

Transactions with owners of the Company

Contribution and distribution

Dividends (note 9) - - - - - - - (76) (76) - (2) (78)

Shares issued for cash 2 2 - - - - - - 4 - - 4

Share based payments - - - - - - - 8 8 - - 8

2 2 - - - - - (68) (64) - (2) (66)

Changes in shareholders'

interests in subsidiaries - - - - (11) - - - (11) - (5) (16)

Total transactions with

owners of the Company 2 2 - - (11) - - (68) (75) - (7) (82)

Balance at 30 June 2016 1,019 1,079 (1) 125 525 389 42 958 4,136 - 138 4,274



CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

STATUTORY BASIS

as at 30 June 2017

(Reviewed) (Audited)

30 June 2017 31 December 2016

Note £m £m

Assets

Goodwill and other intangible assets 10 737 728

Property and equipment 105 109

Investment property 336 333

Investments in associates 13 12

Financial assets 11 11,994 12,325

Total investments 12,343 12,670

Reinsurers’ share of insurance contract liabilities 16 2,454 2,252

Insurance and reinsurance debtors 3,112 2,823

Deferred tax assets 262 270

Current tax assets 37 65

Other debtors and other assets 567 430

Other assets 866 765

Cash and cash equivalents 12 761 985

20,378 20,332

Assets of operations classified as held for sale 5b 677 807

Total assets 21,055 21,139

Equity and liabilities

Equity

Shareholders’ equity 13 3,651 3,715

Tier 1 notes 14 297 -

Non-controlling interests 132 132

Total equity 4,080 3,847

Liabilities

Loan capital 15 441 1,068

Insurance contract liabilities 16 13,032 12,676

Insurance and reinsurance liabilities 1,041 954

Borrowings 225 251

Deferred tax liabilities 56 54

Current tax liabilities 23 32

Provisions 390 420

Other liabilities 1,090 1,087

Provisions and other liabilities 1,559 1,593

16,298 16,542

Liabilities of operations classified as held for sale 5b 677 750

Total liabilities 16,975 17,292

Total equity and liabilities 21,055 21,139


The financial statements were approved on 1 August 2017 by the Board of Directors and are signed on its behalf by:

Scott Egan

Group Chief Financial Officer


CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS

STATUTORY BASIS



6 months 6 months

30 June 2017 30 June 2016

(Re-presented1)

Note £m £m

Cashflows from operating activities

Net profit for the year before tax from continuing operations 263 161

Adjustments for non-cash movements in net profit for the period

Depreciation 11 10

Amortisation and impairment of intangible assets 45 40

Amortisation of available for sale investments 31 35

Fair value gains on disposal of financial assets - 26

Impairment charge on available for sale financial assets - 2

Share of profit of associates (1) -

Net gains related to business disposals (52) -

Foreign exchange loss/(gain) 9 (68)

Other non-cash movements1 16 17

Changes in operating assets/liabilities

Loss and loss adjustment expenses (96) (156)

Unearned premiums 182 (12)

Movement in working capital1 (326) 183

Reclassification of investment income and interest paid (72) (122)

Tax paid (35) (63)

Dividend income 16 15

Interest and other investment income 141 159

Dividends received from associates 14 1

Pension deficit funding (65) (65)

Net cashflows from operating activities - continuing operations 81 163

Net cashflows from operating activities - discontinued operations - (9)

Cashflows from investing activities

Proceeds/(cash outflows) from sales or maturities of:

Financial assets 1,992 2,085

Investment property - 28

Disposals of businesses not classified as discontinued (3) 2

Disposal of UK Legacy liabilities (101) -

Purchase of:

Financial assets (1,654) (2,081)

Property and equipment (7) (18)

Intangible assets (54) (45)

Net cashflows from investing activities - continuing operations 173 (29)

Net cashflows from investing activities - discontinued operations - 333

Cashflows from financing activities

Proceeds from issue of share capital 4 4

Proceeds from issue of Tier 1 notes 297 -

Dividends paid to ordinary shareholders (112) (71)

Coupon payment on Tier 1 notes (3) -

Dividends paid to preference shareholders (5) (5)

Dividends paid to non-controlling interests (4) (2)

Redemption of long term borrowings (607) -

Movement in other borrowings (39) -

Interest paid (110) (80)

Net cashflows from financing activities - continuing operations (579) (154)

Net (decrease)/increase in cash and cash equivalents (325) 304

Cash and cash equivalents at beginning of the period 1,087 902

Effect of exchange rate changes on cash and cash equivalents (12) 75

Cash and cash equivalents at end of the period 12 750 1,281

1 Following a review of other non-cash movements, specific balances have been further analysed and classified as movements in working capital for HY 2016. These adjustments

have no impact on the overall reported cash flow from operating activities in either year, or any other notes to the financial statements.


BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

RSA Insurance Group plc (the ‘Company’) is a public limited company incorporated and domiciled in England and Wales. The Company

through its subsidiaries and associates (together the ‘Group’ or ‘RSA’) provides personal and commercial insurance products to its global

customer base, principally in the UK, Ireland, Middle East (together ‘UK & International’), Scandinavia and Canada.

1. BASIS OF PREPARATION

The annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the

European Union. The condensed consolidated financial information in this half yearly report has been prepared in accordance with

International Accounting Standard 34 ‘Interim Financial Reporting’ (IAS 34), as adopted by the European Union, and the Disclosure and

Transparency Rules of the Financial Conduct Authority.

The Board has reviewed the Group’s ongoing commitments for the next twelve months and beyond. The Board’s review included the

Group’s strategic plans and updated forecasts, capital position, liquidity and credit facilities and investment portfolio. Based on this review no

material uncertainties that would require disclosure have been identified in relation to the ability of the Group to remain a going concern for

at least the next twelve months, from both the date of the Condensed Statement of Financial Position and the approval of the Condensed

Consolidated Financial Statements.

These Condensed Consolidated Financial Statements have been prepared by applying the accounting policies used in the Annual Report and

Accounts 2016 (see note 4 and Appendix A).

2. ADOPTION OF NEW AND REVISED STANDARDS

There are only a small number of narrow scope amendments arising from annual improvement projects that are applicable to the Group for

the first time in 2017, none of which have had a significant impact on the Condensed Consolidated Financial Statements.

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

IFRS 17 ‘Insurance Contracts’ and IFRS 9 ‘Financial Instruments’

The IASB published IFRS 17 ‘Insurance Contracts’ on 18 May 2017 which will change the way in which insurance contracts are accounted for

and presented. The latest adoption date for the new standard will be 2021 and it still has to be endorsed by the EU. Work has already

commenced on assessing the impact of the new standard.

The Group plans to take advantage of the deferral approach available under IFRS 4 for adopting IFRS 9 ‘Financial Instruments’, thereby

adopting it from 1 January 2021, at the same time as IFRS 17.

IFRS 16 ‘Leases’

In January 2016, the IASB issued IFRS 16 ‘Leases’ to replace the existing standard IAS 17, which will be effective from 1 January 2019 but with

earlier adoption permitted.

The main change under IFRS 16 is that it requires the recognition of all lease obligations, together with an asset representing the right to the

use of the leased asset during the term of the lease. Under IAS 17, for leases qualifying as operating leases, the lease obligations are not

recognised in the Statement of Financial Position.

The Group has completed its initial assessment of the impact of IFRS 16 on the financial statements and is in the process of considering the

options available on transition to the new standard.

IFRS 15 ‘Revenue Recognition’

IFRS 15 ‘Revenue Recognition’ becomes effective from 1 January 2018. Revenue arising from insurance contracts and financial instruments is outside

the scope of IFRS 15. Work is progressing on preparing for the adoption of IFRS 15 which is not expected to have a significant impact for the Group.

Other pronouncements

There are a number of amendments to IFRS that have been issued by the IASB that become mandatory during 2017 or in a subsequent

accounting period. The Group has evaluated these changes and none are expected to have a significant impact on the consolidated financial

statements.

4. RISK MANAGEMENT


The principal risks and uncertainties of the Group and the management of these risks have not materially changed since the year ended 31

December 2016.

Details of the principal risks and uncertainties can be found in the Annual Report and Accounts 2016; Risk Management information in

Note 5 on pages 120 to 126 and the estimation techniques and uncertainties in the specific disclosures to which they relate.


SIGNIFICANT TRANSACTIONS AND EVENTS

5. DISCONTINUED OPERATIONS AND DISPOSALS

a) Discontinued operations

During the six months to 30 June 2017, no operations have been classified as discontinued.

During 2016, the Group classified the following operations as discontinued on the basis that they represented a separate geographical area

of operation. The sales all completed during 2016.

Operation Date of disposal Acquirer

Russia 29 January 2016 Joint Stock Insurance Company

Blagosostoyanie

Brazil 29 February 2016 Suramericana S.A.

Colombia 31 March 2016 Suramericana S.A.

Chile 30 April 2016 Suramericana S.A.

Argentina 30 April 2016 Suramericana S.A.

Mexico 31 May 2016 Suramericana S.A.

Uruguay 30 June 2016 Suramericana S.A.

The revenue, expenses and related income tax expense in 2016 relating to these discontinued operations are set out in the comparatives

below.

DISCONTINUED INCOME STATEMENT

for the period ended 30 June 2017 (Reviewed) (Reviewed)

6 months 6 months

30 June 2017 30 June 2016

Note £m £m

Income

Gross written premiums - 254

Less: reinsurance premiums - (86)

Net written premiums 7 - 168

Change in the gross provision for unearned premiums - 38

Less: change in provision for unearned reinsurers’ premiums - (19)

Change in provision for unearned premiums - 19

Net earned premiums - 187

Net investment return - 16

Total income - 203

Expenses

Gross claims incurred - (311)

Less: claims recoveries from reinsurers - 215

Net claims - (96)

Underwriting and policy acquisition costs - (88)

Unwind of discount - (5)

Other operating expenses - (7)

Total expenses - (196)

Profit from discontinued operations before tax - 7

Loss on disposal after tax 5c - (36)

Loss before tax - (29)

Income tax expense - (5)

Loss after tax - (34)


5. DISCONTINUED OPERATIONS AND DISPOSALS (CONTINUED)

DISCONTINUED STATEMENT OF COMPREHENSIVE INCOME

for the period ended 30 June 2017 (Reviewed) (Reviewed)

6 months 6 months

30 June 2017 30 June 2016

£m £m

(Re-presented1)

Loss for the period from discontinued operations net of tax - (34)

Items from discontinued operations that may be reclassified to the income

statement:

Exchange gains recycled on disposal of discontinued operations net of tax - 111

Exchange gains net of tax - 7

- 118

Fair value losses recycled on disposal of discontinued operations net of tax - (1)

Fair value gains on available for sale financial assets net of tax - 3

- 2

Items from discontinued operations that will not be reclassified to the income

statement:

Movement in property revaluation, net of tax - 2

Other comprehensive income for the year from discontinued operations - 122

Total comprehensive expense for the year from discontinued operations - 88 1 On a basis consistent with FY 2016 the HY 2016 Other Comprehensive Income exchange gains and losses have been reclassified resulting in a total net impact of £nil and a reclassification of £94m income from continuing to discontinued operations.



b) Held for sale disposal groups


UK Legacy1 Total UK Legacy1 Oman2 UK Other Total

£m £m £m £m £m £m

Assets classified as held for sale

Property and equipment - - - - 4 4

Investments - - 689 87 - 776

Reinsurers’ share of insurance contract liabilities 677 677 90 6 - 96

Insurance and reinsurance debtors - - - 15 - 15

Other debtors and other assets - - 9 6 1 16

Cash and cash equivalents - - 101 3 - 104

Total assets of disposal groups 677 677 889 117 5 1,011

Remeasurement of disposal groups to fair

value less costs to sell - - (204) - - (204)

Assets of operations classified as held for

sale 677 677 685 117 5 807

Liabilities directly associated with assets

classified as held for sale

Insurance contract liabilities 677 677 685 50 - 735

Insurance and reinsurance liabilities - - - 5 - 5

Provisions and other liabilities - - - 10 - 10

Liabilities of disposal groups 677 677 685 65 - 750

Total net assets of disposal groups - - - 52 5 57

1 The UK Legacy investments presented as held for sale at 31 December 2016 have been disposed of and the proceeds used to acquire reinsurance for the

gross legacy liabilities pending completion of a subsequent legal transfer of the business. 2 It is no longer expected that RSA will lose control over its Oman business as a result of an initial public offering of its shares that is taking place during the third quarter of 2017 and as a consequence the assets and liabilities of this business were reclassified out of held for sale.



c) Discontinued operations disposed of during the period

6 months 6 months

30 June 2017 30 June 2016

Total

Latin America Russia Total

£m £m £m £m

Consideration received - 432 5 437

Less: transaction costs - (20) (1) (21)

Net proceeds from sales - 412 4 416

Less: carrying value of net assets disposed of1 - (321) (3) (324)

Gains on sale before recycling of items from other comprehensive

income - 91 1 92

Recycle of items from other comprehensive income on disposals:

- Foreign currency translation reserve - (100) (11) (111)

- Unrealised loss on available for sale investments - (1) - (1)

Loss on sales of discontinued operations before tax - (10) (10) (20)

Tax on disposal - (16) - (16)

Loss on sales of discontinued operations after tax - (26) (10) (36) 1 Includes £nil (30 June 2016: £98m) of cash balances in the disposed businesses.

d) Gain/(loss) related to business disposals not classified as discontinued

In the six months to 30 June 2017 the net gain related to business disposals within continuing operations was £52m comprised of £66m

mainly relating to the realised gain on the mark-to-market of the bonds transferred to the UK Legacy buyer, £(22)m on the commutation

of the Group’s Adverse Development Cover reinsurance protection that was bought in 2014 to partly protect the UK Legacy book and

£8m from the sale of the UK Accident and Repair business.

At full year 2016, the assets and liabilities of the Oman and UK Legacy business were classified as held for sale. Upon classification as held

for sale, the net assets were measured at the lower of carrying amount and fair value less costs to sell. The valuation adjustment resulted in

a £234m loss which was recognised in the continuing income statement for full year 2016.

6. REORGANISATION COSTS

Reorganisation costs represent external and clearly identifiable internal costs that are necessarily incurred and directly attributable to the

Group’s restructuring programme. The aim of the restructuring programme is to both reduce operating costs and improve profitability.

In the six months to 30 June 2017, the reorganisation costs of £41m (30 June 2016: £70m) comprised of £20m (30 June 2016: £15m) of

redundancy costs and £21m (30 June 2016: £55m) of other restructuring activities.


NOTES TO THE CONDENSED CONSOLIDATED INCOME STATEMENT AND CONDENSED

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

7. OPERATING SEGMENTS

Group excluding disposals

The Group’s primary operating segments comprise Scandinavia, Canada, UK & International and Central functions which is consistent with

how the Group is managed. The primary operating segments are based on geography and are all engaged in providing personal and commercial

general insurance services. Central functions include the Group’s internal reinsurance function and Group Corporate Centre.

Each operating segment is managed by a member of the Group Executive Committee who is directly accountable to the Group Chief

Executive and Board of Directors, who together form the central decision making function in respect of the operating activities of the Group.

The UK is the Group’s country of domicile and one of its principal markets.

During 2016, following a reorganisation change, the Middle East was combined with the UK and Ireland regions to form the ‘UK &

International’ segment. Previously the Middle East operations were reported under ‘non-core’. The 2016 half year segmental results have

been re-presented accordingly.

Disposals

Disposals are categorised between disposals of continuing operations and discontinued operations:

Disposals of continuing operations

On 7 February 2017, the Group's UK Legacy liabilities were disposed of to Enstar Group Limited. The transaction initially takes the form of

a reinsurance agreement, effective from 31 December 2016, which substantially effects economic transfer, to be followed by completion of

a subsequent legal transfer of the business. The Group’s UK Legacy business is managed as part of the UK operations. It is not presented as

a discontinued operation as it is neither a separate geographical area nor a major line of business.

Discontinued operations

During 2015, the Group classified the Latin American and Russian operations as discontinued as they were held for sale at 31 December

2015 and represented a separate geographical area of operation. The sale of these operations completed in the first six months of 2016 and

they are therefore classified as discontinued at 30 June 2016 (see note 5 for further details).

During the six months to 30 June 2017, no further operations have been classified as discontinued and as such, the 2016 comparatives do not require re-presentation.

Assessing segment performance

The Group uses the following key measures to assess the performance of its operating segments:

Net written premiums;

Underwriting result;

Combined operating ratio (‘COR’);

Operating result.

Net written premiums is the key measure of revenue used in internal reporting.

Underwriting result, COR and Operating result are the key internal measures of profitability of the operating segments. The COR reflects

the ratio of claims costs and expenses (including commission) to earned premiums, expressed as a percentage.


7. OPERATING SEGMENTS (CONTINUED)

Segment revenue and results

Period ended 30 June 2017

Scandinavia Canada UK &

International Central

Functions Total

Group

£m £m £m £m £m

Net written premiums 1,064 728 1,628 29 3,449

Underwriting result 162 40 32 (12) 222

Investment result 40 31 77 - 148

Central costs and other activities - - - (10) (10)

Operating result (management basis) 202 71 109 (22) 360

Realised gains 4

Unrealised losses, impairments and foreign exchange (12)

Interest costs (89)

Amortisation of intangible assets (8)

Pension net interest and administration costs (3)

Reorganisation costs (41)

Net gains related to business disposals 52

Profit before tax 263

Tax on operations (57)

Profit after tax 206

Combined operating ratio (%) 81.9% 94.8% 98.0% 93.2%


7. OPERATING SEGMENTS (CONTINUED)

Segment revenue and results

Period ended 30 June 2016 – Re-presented

Scandinavia Canada UK &

International

Central

Functions

Group

excluding

disposals

Disposals of

continuing

operations

Continuing

operations

per income statement

Discontinued

operations

(note 5)

Total

Group

£m £m £m £m £m £m £m £m £m

Net written premiums 965 609 1,518 29 3,121 (42) 3,079 168 3,247

Underwriting result 96 37 82 (36) 179 (8) 171 3 174

Investment result 35 32 74 - 141 - 141 9 150

Central costs and other activities - - - (12) (12) - (12) - (12)

Operating result (management basis) 131 69 156 (48) 308 (8) 300 12 312

Realised gains 10 2 12

Unrealised losses, impairments and foreign exchange (11) - (11)

Interest costs (54) - (54)

Amortisation of intangible assets (7) - (7)

Pension net interest and administration costs (2) - (2)

Solvency II costs (6) - (6)

Reorganisation costs (63) (7) (70)

Economic assumption changes (6) - (6)

Loss on disposal of businesses - (20) (20)

Profit/(loss) before tax 161 (13) 148

Tax on operations (36) (5) (41)

Tax on disposals of discontinued operations - (16) (16)

Profit/(loss) after tax 125 (34) 91

Combined operating ratio (%) 88.5% 94.5% 94.8% 94.2% 94.7%

8. EARNINGS PER SHARE

The earnings per ordinary share are calculated by reference to the profit attributable to the ordinary shareholders and the weighted average number

of shares in issue during the period.

The number of shares used in the calculation on a basic and diluted basis were 1,020,292,327 and 1,065,655,658 respectively (excluding ordinary

shares purchased by various employee share trusts and held as own shares). The weighted average number of diluted shares recognises that the Tier

1 loan notes issued in the period (note 14), are convertible in the event that certain regulatory capital measures are breached.

Basic earnings per share are calculated by dividing the profit attributable to the ordinary shareholders of the Parent Company by the weighted average

number of ordinary shares in issue during the period, excluding ordinary shares purchased by various employee share trusts and held as own shares.

Diluted earnings per share are calculated by dividing the profit attributable to the ordinary shareholders of the Parent Company by the diluted

weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by various employee share trusts and

held as own shares.


9. DISTRIBUTIONS PAID AND DECLARED

30 June 2017 30 June 2016 30 June 2017 30 June 2016

p p £m £m

Ordinary dividend:

Final paid in respect of prior year 11.0 7.0 112 71

Preference dividend 5 5

Tier 1 notes coupon payment 3 -

120 76

Subsequent to 30 June 2017, the directors declared an interim dividend of 6.6p (30 June 2016: 5.0p) per ordinary share amounting to a

total of £67m (2016: £51m). The proposed dividend will be paid on X 2017 and accounted for in shareholders' equity as an appropriation of retained earnings in the year ending 31 December 2017.

The Tier 1 coupon payment relates to the two floating rate notes issued on 27 March 2017 (note 14).

NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

10. GOODWILL AND INTANGIBLE ASSETS


£m £m

Goodwill 345 345

Externally acquired software 9 14

Internally generated software 311 287

Other 72 82

Total goodwill and other intangible assets 737 728

Other includes customer lists, renewal rights and acquired brands.

The following impairment charges and write-offs have been recognised in the period.

30 June 2017 30 June 2016

£m £m

Other intangible asset write-offs - 1

- 1

The software impairment charge of £nil during the six months to 30 June 2017 (30 June 2016: £1m) was recognised within underwriting

and policy acquisition costs.

11. FINANCIAL ASSETS AND FAIR VALUE MEASUREMENTS

Financial assets


£m £m

Equity securities 770 692

Debt securities 11,070 12,321

Financial assets measured at fair value 11,840 13,013

Loans and receivables 154 88

Total financial assets 11,994 13,101

Less: Assets classified as held for sale

Debt securities - 776

Total financial assets net of held for sale 11,994 12,325


11. FINANCIAL ASSETS AND FAIR VALUE MEASUREMENTS (CONTINUED)

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments and other items that are measured subsequent to initial recognition at fair

value as well as financial liabilities not measured at fair value, grouped into Levels 1 to 3. The table does not include financial assets and

liabilities not measured at fair value if the carrying value is a reasonable approximation of fair value.

Fair value hierarchy

30 June 2017

Level 1 Level 2 Level 3

Less: Assets of

operations classified as

held for sale Total

£m £m £m £m £m

Group occupied property - land and buildings - - 34 - 34

Investment property - - 336 - 336

Available for sale financial assets:

Equity securities 403 - 366 - 769

Debt securities 3,802 6,934 316 - 11,052

Financial assets at fair value through the income statement:

Equity securities - - 1 - 1

Debt securities - - 18 - 18

4,205 6,934 1,071 - 12,210

Derivative assets:

At fair value through the income statement - 39 - - 39

Designated as hedging instruments - 18 - - 18

Total assets measured at fair value 4,205 6,991 1,071 - 12,267

Derivative liabilities:



Total liabilities measured at fair value - 114 - - 114

Loan capital - 464 9 - 473

Total value of liabilities not measured at fair value - 464 9 - 473




31 December 2016

Level 1 Level 2 Level 3

Less: Assets of operations

classified as

held for sale Total

£m £m £m £m £m

Group occupied property - land and buildings - - 34 4 30

Investment property - - 333 - 333

Available for sale financial assets:

Equity securities 323 - 363 - 686

Debt securities 4,256 7,780 266 776 11,526

Financial assets at fair value through the income statement:

Equity securities - - 6 - 6

Debt securities - - 19 - 19

4,579 7,780 1,021 780 12,600

Derivative assets:



Total assets measured at fair value 4,579 7,836 1,021 780 12,656

Derivative liabilities:



Total liabilities measured at fair value - 167 - - 167

Loan capital - 1,129 8 - 1,137

Fair value of liabilities not measured at fair value - 1,129 8 - 1,137

During 2016, the Group re-evaluated the basis of valuation of certain investments. As a consequence during 2016 the Group transferred

£3,074m of debt securities from a classification of Level 1 to a classification of Level 2.

Estimation of the fair value of assets and liabilities

Fair value is used to value a number of assets within the Statement of Financial Position and represents market value at the reporting date.

Group occupied property and investment property

Group occupied properties are valued on a vacant possession basis using third party valuers. Investment properties are valued, at least annually, at

their highest and best use.

The fair value of property has been determined by external, independent valuers, having appropriate recognised professional qualifications and

recent experience in the location and category of the property being valued.

The valuations of buildings with vacant possession are based on the comparative method of valuation with reference to sales of other vacant

buildings. Fair value is then determined based on the locational qualities and physical building characteristics (principally condition, size, specification

and layout) as appropriate.

Investment properties are valued using discounted cashflow models which take into account the net present value of cashflows to be generated

from the properties. The cashflow streams reflect the current rent (the gross rent) payable to lease expiry, at which point it is assumed that each

unit will be re-let at its estimated rental value. Allowances have been made for voids and rent free periods where applicable. The appropriate rent

to be capitalised is selected on the basis of the location of the building, its quality, tenant credit quality and lease terms amongst other factors.

These cashflows are discounted at an appropriate rate of interest to determine their present value.



In both cases the estimated fair value would increase/(decrease) if:

The estimated rental value is higher/(lower);

Void periods were shorter/(longer);

The occupancy rates were higher/(lower);

Rent free periods were shorter/(longer);

The discount rates were lower/(higher).

Derivative financial instruments

Derivative financial instruments are financial contracts whose fair value is determined on a market basis by reference to underlying interest rate,

foreign exchange rate, equity instrument or indices.

Loan capital

The fair value measurement of the Group’s loan capital instruments, with the exception of the subordinated guaranteed US$ bonds, is

based on pricing obtained from a range of financial intermediaries who base their valuations on recent transactions of the Group’s loan

capital instruments and other observable market inputs such as applicable risk free rate and appropriate credit risk spreads.

The fair value measurement of the subordinated guaranteed US$ bonds is also obtained from an indicative valuation based on the

applicable risk free rate and appropriate credit risk spread.


Fair value for all assets and liabilities which are either measured or disclosed is determined based on available information and categorised

according to a three-level fair value hierarchy as detailed below.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from data other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 fair value measurements are those derived from valuation techniques that include significant inputs for the asset or liability valuation that are not based on observable market data (unobservable inputs).

A financial instrument is regarded as quoted in an active market (Level 1) if quoted prices for that financial instrument are readily and regularly

available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly

occurring market transactions on an arm’s length basis.

The Group uses prices received from external providers who calculate these prices from quotes available at the reporting date for the particular

investment being valued. For investments that are actively traded the Group determines whether the prices meet the criteria for classification as a

Level 1 valuation. The price provided is classified as a Level 1 valuation when it represents the price at which the investment traded at the reporting

date taking into account the frequency and volume of trading of the individual investment together with the spread of prices that are quoted at the

reporting date for such trades. Typically investments in frequently traded government debt would meet the criteria for classification in the Level 1

category. Where the prices provided do not meet the criteria for classification in the Level 1 category, the prices are classified in the Level 2

category.

In limited circumstances, the Group does not receive pricing information from an external provider for its financial investments. In such circumstances

the Group calculates fair value which may use input parameters that are not based on observable market data. Unobservable inputs are based on

assumptions that are neither supported by prices from observable current market transactions for the same instrument nor based on available

market data. In these cases, judgment is required to establish fair values. Valuations that require the significant use of unobservable data are classified

as Level 3 valuations. In addition, the valuations used for investment properties and for Group occupied properties are classified in the Level 3

category.



A reconciliation of Level 3 fair value measurements of financial assets is shown in the table below. There are no Level 3 financial liabilities.

Available for sale investments

Investments at fair value

through the income statement

Equity

securities

Debt

securities

Equity

securities

Debt

securities Total

£m £m £m £m £m

Level 3 financial assets at 1 January 2016 269 154 38 15 476

Total gains/(losses) recognised in:

Income statement 1 - 1 (9) (7)

Other comprehensive income 16 1 - - 17

Purchases 49 96 5 28 178

Disposals 7 - (38) (15) (46)

Exchange adjustment 21 15 - - 36

Level 3 financial assets at 1 January 2017 363 266 6 19 654

Total losses recognised in:

Income statement - - - (1) (1)

Other comprehensive income (4) (1) - - (5)

Purchases 12 54 - - 66

Disposals (7) (2) (5) - (14)

Exchange adjustment 2 (1) - - 1

Level 3 financial assets at 30 June 2017 366 316 1 18 701

The Group's property portfolio (including the Group occupied properties) is almost exclusively located in the UK. An increase of 100bps

in the discount rate used to value the UK property portfolio would result in a decrease of £51m (31 December 2016: £72m) in the fair

value of the portfolio.

The Group investments in financial assets classified at Level 3 in the hierarchy are primarily investments in various private fund structures

investing in debt instruments where the valuation includes estimates of the credit spreads on the underlying holdings. The estimates of the

credit spread are based upon market observable credit spreads for what are considered to be assets with similar credit risk. The aggregate

value of these holdings included in the table above at 30 June 2017 is £701m (31 December 2016: £654m). An increase in the estimate of

the credit spread of the underlying holdings of 100bps would result in a reduction in the fair value of these investments at 30 June 2017 of

£22m (31 December 2016: £29m).


12. CASH AND CASH EQUIVALENTS

30 June 2017 30 June 2016 31 December 2016

£m £m £m

Cash and cash equivalents and bank overdrafts (as reported within the

Condensed Consolidated Statement of Cashflows) 750 1,281 1,087

Add: Bank overdrafts reported in Borrowings 11 - 2

Total cash and cash equivalents 761 1,281 1,089

Less: cash and cash equivalents reported in assets held for sale - - 104

Total cash and cash equivalents (as reported in the Condensed

Consolidated Statement of Financial Position) 761 1,281 985

13. SHARE CAPITAL

The issued share capital at 30 June 2017 consists of 1,022,652,327 ordinary shares of £1.00 each and 125,000,000 of preference shares of £1.00 each

(31 December 2016: 1,019,554,986 ordinary shares of £1.00 each and 125,000,000 preference shares of £1.00 each).

The issued share capital of the Parent Company is fully paid.

14. TIER 1 NOTES

On 27 March 2017, the Group issued two floating rate Restricted Tier 1 (RT1) Notes totalling £297m in aggregate size and with a blended

coupon of c.4.7%. The Notes are as follows:

Swedish Krona 2,500m at 3 month Stibor +525bps (equivalent to c.4.8% coupon on issue)

Danish Krone 650m at 3 month Cibor +485bps (equivalent to c.4.6% coupon on issue)

Proceeds of this issuance have been on-lent within the Group to finance our Scandinavian business.

The Tier 1 notes are treated as a separate category within Equity and future coupon payments recognised outside of the Profit after Tax

result, similar to the treatment of preference dividends.


15. LOAN CAPITAL


£m £m

Subordinated guaranteed US$ bonds 6 6

Guaranteed subordinated step-up notes due 2039 40 298

Guaranteed subordinated notes due 2045 395 395

Total dated loan capital 441 699

Perpetual guaranteed capital securities - -

369

Total loan capital 441 1,068

The subordinated guaranteed US$ bonds were issued in 1999 and have a nominal value of $9m and a redemption date of 15 October 2029.

The rate of interest payable on the bonds is 8.95%.

The dated guaranteed subordinated step-up notes were issued on 20 May 2009 at a fixed rate of 9.375%. The nominal £500m bonds have a

redemption date of 20 May 2039. On 7 July 2016, the Group bought back £200m in nominal value of these step-up notes, with a further

£245m being bought back on 29 March 2017 and £15m in Q2 2017. The remaining £40m has a first call date of 20 May 2019.

The dated guaranteed subordinated notes were issued on 10 October 2014 at a fixed rate of 5.125%. The nominal £400m bonds have a

redemption date of 10 October 2045. The Group has the right to repay the notes on specific dates from 10 October 2025. If the bonds are

not repaid on that date, the applicable rate of interest would be reset at a rate of 3.852% plus the appropriate benchmark gilt for a further

five year period.

The perpetual guaranteed subordinated capital securities issued on 12 May 2006 have a nominal value of £375m and the rate of interest

payable is 6.701% of the nominal value. On 29 March 2017, the Group bought back £347m of the outstanding principal amount. The remaining

£28m has been called and is therefore presented within other creditors in the Consolidated Statement of Financial Position.

The bonds and the notes are contractually subordinated to all other creditors of the Group such that in the event of a winding up or of

bankruptcy, they are able to be repaid only after the claims of all other creditors have been met.

There have been no defaults on any bonds or notes during the year. The Group has the option to defer interest payments on the bonds and

notes but has to date not exercised this right.

Finance costs of £89m include £59m relating to debt buyback premium.


16. INSURANCE CONTRACT LIABILITIES

Gross insurance contract liabilities and the reinsurers' share of insurance contract liabilities

Details of the Group accounting policies in respect of insurance contract liabilities can be found in Note 4 on page 115 of the Annual

Report and Accounts 2016.

The gross insurance contract liabilities and the reinsurers' share of insurance contract liabilities presented in the Statement of Financial

Position are comprised as follows:

Gross RI Net

Period ended 30 June 2017 2017 2017 2017

£m £m £m

Provision for unearned premiums 3,580 (886) 2,694

Provision for losses and loss adjustment expenses 10,129 (2,245) 7,884

Total insurance contract liabilities 13,709 (3,131) 10,578

Less: Held for sale provision for unearned premiums - - -

Less: Held for sale provisions for losses and loss adjustment expenses 677 (677) -

Less: Total liabilities held for sale 677 (677) -

Provision for unearned premiums at 30 June net of held for sale 3,580 (886) 2,694

Provision for losses and loss adjustment expenses at 30 June net of held for sale 9,452 (1,568) 7,884

Total insurance contract liabilities excluding held for sale 13,032 (2,454) 10,578

Gross RI Net

Period ended 31 December 2016 2016 2016 2016

£m £m £m

Provision for unearned premiums 3,328 (818) 2,510

Provision for losses and loss adjustment expenses 10,083 (1,530) 8,553

Total insurance contract liabilities 13,411 (2,348) 11,063

Less: Held for sale provision for unearned premiums 17 (2) 15

Less: Held for sale provisions for losses and loss adjustment expenses 718 (94) 624

Less: Total liabilities held for sale 735 (96) 639

Provision for unearned premiums at 31 December net of held for sale 3,311 (816) 2,495

Provision for losses and loss adjustment expenses at 31 December net of held for sale 9,365 (1,436) 7,929

Total insurance contract liabilities excluding held for sale 12,676 (2,252) 10,424


17. RETIREMENT BENEFIT OBLIGATIONS

The table below provides a reconciliation of the movement in the Group’s pension fund position under IAS 19 (net of tax) from 1 January 2017 to

30 June 2017. UK Other Group

£m £m £m

Pension fund at 1 January 2017 (113) (84) (197)

Re-measurements1 2 (7) (5)


Other movements2 3 2 5

Pension fund at 30 June 2017 (54) (89) (143)

UK Other Group

£m £m £m

Pension fund at 1 January 2016 117 (53) 64

Re-measurements1 (295) (20) (315)


Other movements2 11 (11) -

Pension fund at 31 December 2016 (113) (84) (197) 1 Remeasurements include investment expenses, variance against net interest, change in actuarial assumptions and experience losses. 2 Other movements include regular contributions, service/administration costs and net interest costs.

The Group's IAS 19 pension position has improved in the first half of 2017 from a deficit of £197m to a deficit of £143m.

The UK pension position has improved by £59m during the first half of 2017 to a deficit of £54m. The movement in the period is driven

by gains on scheme assets of £32m, contributions of £64m, experience losses of £(12)m, changes to actuarial assumptions of £(14)m and

service costs of £(11)m.

A full actuarial review of the overseas pension positions will be carried out at the year end.

18. RELATED PARTY TRANSACTIONS

During the first half of 2017, no related party transactions took place that have materially affected the financial position or the results for

the period. There have also been no changes in the nature of the related party transactions as disclosed in Note 15 on page 137 of the

Annual Report and Accounts for the year ended 31 December 2016.

19. RESULTS FOR THE YEAR 2016

The statutory accounts of RSA Insurance Group plc for the year ended 31 December 2016 have been delivered to the Registrar of Companies.

The independent auditor’s report on the Group accounts for the year ended 31 December 2016 is unqualified, does not draw attention to any

matters by way of emphasis and does not include a statement under section 498(2) or (3) of the Companies Act 2006.


APPENDIX A: EXCHANGE RATES

6 months 6 months 12 months

Local currency/£ 30 June 2017 30 June 2016 31 December 2016

Average Closing Average Closing Average Closing

Canadian Dollar 1.68 1.69 1.91 1.74 1.79 1.66

Danish Krone 8.64 8.47 9.57 8.98 9.11 8.71

Swedish Krona 11.14 10.98 11.95 11.38 11.59 11.19

Euro 1.16 1.14 1.28 1.21 1.22 1.17


RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

We confirm that to the best of our knowledge:

The condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the EU and

gives a true and fair view of the assets, liabilities, financial position and result of the Group.

The interim management report includes a fair review of the information required by:

DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal

risks and uncertainties for the remaining six months of the year; and

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six

months of the current financial year and that have materially affected the financial position or performance of the entity during

that period; and any changes in the related party transactions described in the last annual report that could do so.

Signed on behalf of the Board

Stephen Hester Scott Egan Group Chief Executive Group Chief Financial Officer

1 August 2017 1 August 2017


INDEPENDENT REVIEW REPORT TO RSA INSURANCE GROUP PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six

months ended 30 June 2017 which comprises the condensed consolidated income statement, the condensed consolidated statement of

comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial

position, the condensed consolidated statement of cashflows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-

yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim

Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules (“the DTR”) of the UK’s Financial Conduct

Authority (“the UK FCA”).

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim

Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A

review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters,

and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and

consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial

statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and

consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an

audit. Accordingly, we do not express an audit opinion.

Directors’ responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for

preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting

Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-

yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report

based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the

requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are

required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Stuart Crisp

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

1 August 2017

2017 interim results - rsa insurance group...stated earnings / share (pence) 18.4p 7.9p underlying...

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